Former federal politician, Cheryl Kernot, at the Local Government Managers Australia National Congress.

By Angela Dorizas

Local government must forge new partnerships with ‘social businesses’ to keep pace with a changing social landscape, says former federal politician Cheryl Kernot.

In her address to the Local Government Managers Australia (LGMA) National Congress in Adelaide, Ms Kernot, now director of social business at the University of New South Wales’ Centre for Social Impact, said local government was likely to experience a “changed social landscape” and new sectoral relationships.

“What I see is the changed landscape in which you are going to be operating and some of you already are,” she said.

Ms Kernot said key features of this “quiet revolution”, which was already taking place in the UK, included new organisational forms; the emergence of social enterprises; new forms of finance; and a move away from grants dependency.

She said local government would experience a change in its relationships with the private sector and third sector, which is comprised on not-for-profits, non-government organisations, community groups and other ‘social enterprises’ generating a profit.

“These days we’ve seen a real blurring and overlapping of those spheres,” she said.

“And social business operates at the confluence of all of those spheres.”

Ms Kernot attributed the change to a number of factors, including the emergence of a widespread middle class, increases in per capita wealth and life expectancy and the “collapse of faith in hierarchies and traditional institutions”.

“Overlay all of that with the crises we see all around us,” she said.

“Global warming is obvious… mass extinction and depleted resources, the health crises and the economic crises.

“It’s must harder for us to disconnect from the poverty and the inequalities around us.”

Ms Kernot said social business has thrived in the UK, with more than 60,000 social enterprises currently generating more than $67 billion in turnover and contributing more than $20 billion to GDP each year.

She said the UK Government had actively supported social business by providing community investment tax relief.

Ms Kernot said no such support existed in Australia and despite making submissions to the Henry Tax Review her recommendations for such support had ended up in the “too hard basket”.

Mr Kernot said social businesses could provide local government with innovative responses to unmet social needs within their communities.

“It has a big social impact at the local level,” she said.

“Because of the way they spring up, they usually have a much greater connection to the local community and hard to reach groups.”

She said social enterprise had been around in the UK for sufficient time for local councils to understand the extra value delivered though partnerships with social businesses, including a closer connection to the community.

“They understand that giving a contract to a social business can meet multiple objectives,” she said.

“It is now possible to talk in more than financial returns. There is the social return on investment.”

Ms Kernot challenged local government in Australia to rethink its understanding of the concept of ‘value’.

“We all instinctively know that value goes far beyond the financial, but we just haven’t been able to pin-down how to demonstrate that,” she said.

“At the moment, things that are bought or sold take on a much greater significance.”

The Centre for Social Impact and the Victorian Department of Planning are currently investigating how councils can procure the services of social businesses while meeting the existing rules and guidelines.

“We are pursuing how to make it easier for local government, who sees the added value, to pursue social procurement without falling foul of existing rules and acts,” Ms Kernot said.

The research is expected to be released in the coming months.